Contracts to purchase previously owned U.S. homes unexpectedly fell in May, reflecting ongoing challenges in the housing market. Potential buyers are grappling with higher mortgage rates and steep prices, according to the National Association of Realtors (NAR).
NAR’s Pending Home Sales Index, which is based on signed contracts, dipped 2.1% last month to 70.8. This decline was felt strongly in the South and Midwest—regions known for their affordability. In contrast, the Northeast and West saw a rise in pending sales.
Economists surveyed by Reuters had anticipated a 2.5% rebound. Instead, pending home sales fell 6.6% year-over-year.
“The market is at an interesting point with rising inventory and lower demand,” remarked NAR Chief Economist Lawrence Yun.
May’s resurgence in mortgage rates has hit the housing market hard, leading to a slump in sales and homebuilding activities. Residential investment is expected to have softened in Q2 after robust growth in Q1.
Data from Freddie Mac revealed the average rate on a 30-year fixed-rate mortgage peaked at 7.22% in early May before dropping to 7.03% by month-end, and further to 6.87% by June 20.
“The first half of the year did not meet expectations regarding home sales but exceeded expectations related to home prices,” said Yun. “In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices.”
In this volatile market, buyers and sellers are on a seesaw, swayed by shifting rates and economic uncertainties. As we move into the latter half of the year, the housing landscape remains a dynamic arena, where resilience and adaptability will be key.
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